The BVRLA leasing fleet has reached a six-year high, spurred by strong demand for leased vans and business contract hire (BCH) cars, along with soaring EV salary sacrifice take-up.
The association’s latest Leasing Outlook Report shows the total lease fleet recorded 2.2% year-on-year growth in Q3, rising to above 1.9 million vehicles – only beaten by the performance in Q4 2017.
Light commercial vehicles have driven the rise, up 3.3% year-on-year to an all-time high of 516,253 vans. They are now responsible for over a quarter of the total lease fleet.
Car fleet growth was also up, albeit at a lower level of 1.8%. Both business contract hire and finance lease volumes were up by more than 4% year-on-year to 816,753 and 29,267 cars respectively. But personal contract hire numbers have fallen by 8.6% over the last 12 months, as a result of higher interest rates, higher car prices and a cost-of-living crisis.
Salary sacrifice continued to boom; up 12% since the previous quarter and 68% in the last year, with leasing companies forecasting further rapid growth as cash allowance drivers join the wider employee base in switching to this surrogate fleet scheme when their current car finance contracts end. Some OEMs are even reported to be working with leasing companies on how to position their cars attractively within sal-sac schemes.
Driven by BCH and salary sacrifice, electric vehicles accounted for 42% of new additions to the leasing fleet in Q3 2023. BEV uptake for leasing continues to outperform the overall market, with SMMT figures for the same period showing a BEV share of 17%.
BEV uptake was notable high for business contract hire, accounting for almost half (47%) of all BCH deliveries in the three months from July to September. This was followed by plug-in hybrids with 25% and hybrid cars with 7%. Petrol and diesel power accounted for just 15% and 4% of new BCH additions respectively.
This rapidly rising EV demand means over half (51%) of the association’s lease fleet cars are now zero emission capable.
But it warned that EV demand is far lower for personal contract hire (PCH) customers. Battery electric penetration of new personal contract hire agreements was only 15% in Q3, three times lower than BCH, in a sector where petrol remains the driving force (62%).
Thanks to the green renewal, the BVRLA car lease fleet is now the cleanest it has ever been, with new additions in Q3 averaging carbon dioxide emissions of just 60.2g/km. But there’s a marked difference between the figure of 53.3g/km for new business contract hire cars and the 116.3g/km of new personal contract hire cars – underscoring the need for “a retail stimulus for electric cars as powerful as the Benefit-in-Kind tax rate has been for business drivers”.
The BVRLA says a workable operational solution for electric light commercial vehicles is equally pressing with the average emissions of the diesel LCV fleet actually rising quarter on quarter and year on year.
Other notable trends revealed in the report include:
- Rising demand for maintenance packages: 76.8% of new car contracts and 54.7% of new van contracts include maintenance. However, this is proving a headache for leasecos amid shrinking workshop capacity in dealerships and independent garages.
- Industry interest in used leasing is starting to grow: used vehicles accounted for 20,554 lease contracts, up almost 7,000 in a quarter. This is being spurred on by the opportunity to capitalise on the greater reliability of older electric vehicles and the chance to avoid a residual value hit.
The report also shows widespread concern for EV used values, which have tumbled by more than 30% in the past year. There are now widespread calls for government intervention in the used EV market, with suggestions ranging from an equalisation of VAT rates on home and public charging, to interest-free loans for used EVs, and greater support for charging infrastructure.
Leasing companies also fear the unintended consequences of the ZEV mandate, with the risk that it artificially fuels the market for new EVs and thereby creates a subsequent glut in the used sector.
The full report includes analysis from Auto Trader, Cap HPI and Fleet Assist. It can be read on the BVRLA website.
